How to make money in a gold rush?

Tutoring can be a goldmine, which is why some edtech investors seem to approach it with all the restraint of a horde of prospectors stampeding to a goldrush. Yes, some will ‘strike it big’ but most will be disappointed with the assay their claim produces. There are significant opportunities in tutoring and I can think of a couple of companies who I think will be winners but most face significant barriers in terms of achieving scale, delivering quality and particularly in the recruitment and retention of talent.

One business that’s taken a different approach is TutorCruncher. It’s essentially an SAAS business that manages all the back office and administrative tasks required to run a tutoring business.

TutorCruncher isn’t hugely complex and in theory anyone could build something similar using a system like Salesforce, but why bother (and waste a huge amount of time and effort) to replicate an excellent product that is already being used by some of the most prestigious brands in the sector such as Carfax and Bonas MacFarlane? At it’s backend TutorCruncher brings together several leading software services including MailChimp, sagepay and Xero.

TutorCruncher isn’t an edtech startup, rather it’s an edtech spinout from Bright Young Things (BYT), the boutique tutoring agency run by Woody St John Webster and Malachy Guinness. BYT’s USP is that their tutors aren’t qualified teachers but smart Oxbridge graduates training to be lawyers, barristers and the like. It’s a successful business started five years ago when they both graduated from Oxford. By early 2013 Woody and Malachy made what I think is a very smart decision; rather than looking for ways to keep expanding BYT, they decided to package up their successful internal agency management software as TutorCruncher. To extend the goldrush analogy, they decided here was more money selling picks and shovels than chasing a lucky bonanza.

A recent promotional event for TutorCruncher attracted 60 paying attendees (fees donated to charity) who got a brief product introduction, an explanation from a senior Carfax representative about who they used it followed by a session that covered some of the accounting, taxation and legal issues that impact on agency businesses.

According to Woody Webster, TutorCruncher will turnover £250k in 2014 and make £200K profit. While founders are often a tad overoptimistic about their businesses, I think TutorCruncher should easily exceed £1m turnover by 2015 (with a margin of 60%+). While this may not set some new edtech investors hearts aflutter (particularly from the VC and PE community), unlike many edtech ‘popstars’ TutorCruncher is both rapidly growing, cash generative and profitable. Personally I think spinouts like TutorCruncher may be a more exciting area of edtech than start-ups. It’s no coincidence that such a spinout has come out of a relatively new and innovative education company and it’s something that many larger companies should be seeking to emulate.